House of Representatives

Taxation Laws Amendment Bill (No. 5) 2000

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 1 - Amendment of the Sales Tax Assessment Act 1992

Outline of Chapter

1.1 Schedule 1 to this Bill will insert new section 49A in the Sales Tax Assessment Act 1992 (STAA 1992), dealing with motor vehicles for transporting disabled persons. It will provide for an exempt part of the taxable value for certain vehicles that have been:

designed or adapted for driving by a person who is suffering from a physical impairment; or
designed or adapted for transporting a person who is suffering from a physical impairment.

Summary of the amendments

Purpose of the amendments

1.2 The amendment will overcome an inconsistency in the sales tax treatment of modifications to vehicles to adapt them for driving by, or the transporting of, disabled persons. The exemption contained in item 98 in Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 (ST(E & C)A 1992) allows goods used in such modifications to be purchased free of sales tax. However, in some cases this benefit is effectively removed as the modifications constitute manufacture, resulting in sales tax being payable on the value of the modifications.

Date of effect

1.3 The amendment will apply to any dealing on or after 26 June 1998.

Background to the legislation

1.4 On 5 November 1999 the Government announced that it would amend the sales tax law to encourage the increased construction of purpose-built vehicles that are used to provide transport for disabled persons.

1.5 One particular benefit of these amendments will be to ensure that the transportation needs of disabled participants at the Sydney Paralympic Games in 2000 are met. This has particular application to taxis designed for transporting wheelchair passengers.

1.6 The Government announced that the amendment would apply to dealings on or after 26 June 1998, the date the NSW Government announced the release of 400 additional wheelchair accessible taxi licences.

Detailed explanation of new law

1.7 Item 1 adds new section 49A to Division 4 of Part 3 of the STAA1992. Division 4 deals with exempt parts of the taxable value of goods. Exempt parts are deducted from the taxable value before applying the appropriate rate of sales tax.

1.8 New section 49A relates to motor vehicles for transporting disabled persons. The section will apply to motor vehicles that are:

designed or adapted for driving by a person who is suffering from a physical impairment; or
designed or adapted for transporting a person who is suffering from a physical impairment.

1.9 This will have application to vehicles that are specifically designed for disabled persons and existing vehicles that are modified to make them suitable for use by disabled persons.

1.10 The exempt part of the taxable value of these vehicles is the amount of the taxable value that represents the additional cost of manufacturing the vehicle that relates solely to the vehicle being designed or adapted for the purpose of:

making it suitable to be driven by a person who is suffering with a physical impairment; or
making it suitable to be used for the transportation of a person who is suffering from a physical impairment.

1.11 Modifications envisaged by the new section 49A will be consistent with the types of modifications covered by item 98 in Schedule1 to the ST(E & C)A 1992. For example, a modification made solely to make a vehicle suitable for wheelchair access and carriage would fall within the scope of new section 49A . Modifications of a general nature would not be covered by this section.

Example 1.1 A motor vehicle manufacturer designs a vehicle based on one of their existing station wagon models. The design alters the station wagon by making provision for a wheelchair passenger to be accommodated in the rear cargo section of the station wagon. The vehicles are manufactured on the production line with the additional design features incorporated. The manufacturer sells the modified vehicle for $30,000 (wholesale). The ordinary station wagon model sells for $20,000 (wholesale).The taxable value of the modified vehicle is $30,000. The additional $10,000 relates solely to the changes required to make the vehicle suitable for transporting wheelchair passengers. The section 49A exempt part of the taxable value in this case will be $10,000. Sales tax will be payable on $20,000 ($30,000 - $10,000).

Example 1.2 A standard motor vehicle is purchased (sales tax included) by a motor vehicle dealer and sent to a company for conversion to enable it to accommodate 2 wheelchair passengers. The conversion involves extending the wheel-base and including a high roof section incorporating an extra side door. Brackets and anchorage points are installed to secure a wheelchair carried with the vehicle. The conversion process constitutes manufacture and sales tax is payable under assessable dealing AD4a in Table 1 of Schedule 1 to the STAA1992. In this case the taxable value will be the amount charged by the conversion company.As the modifications relate solely to the purpose of making the vehicle suitable to transport persons suffering from a physical impairment, the whole amount of the taxable value is the section 49A exempt part. Consequently, no sales tax is payable.Note: sales tax was included in the purchase price of the original vehicle purchased by the dealer. Under AD4a the value of goods supplied by the customer is not included in the taxable value unless the goods are always-exempt goods.

Luxury motor vehicles

1.12 Schedule 6 to the ST(E & C)A 1992 imposes a higher rate of sales tax on motor vehicles that have a taxable value that is above the luxury vehicle threshold. In some cases the taxable value of a motor vehicle that has been modified for use by disabled persons may exceed the luxury vehicle threshold. New subsection 49A(3) ensures that, for the purpose of Schedule 6, the taxable value of vehicles covered by section 49A is taken to be reduced by the exempt part. This will ensure that Schedule 6 will only apply in those situations where the taxable value, after deducting the exempt part, exceeds the luxury vehicle threshold.

Refunds of sales tax

1.13 As the amendments apply to dealings with goods on or after 26June 1998 there may be situations where sales tax has been overpaid. Sales tax refunds can be claimed where all the conditions of the relevant credit ground are met. For example, if the sales tax has been passed on to another person, a refund cannot be claimed unless the sales tax is refunded to that person.

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